As Stern Says Goodbye, Knicks, Lakers Set Records As NBA's Most Valuable Teams

When David Stern steps down from his role as NBA commissioner on Feb. 1 after 30 years in the top job, he’ll leave the league almost unrecognizable compared with the one he inherited in February 1984. Once a struggling also-ran to other professional sports, the National Basketball Association is now a global money machine, thanks in large part to Stern’s leadership on labor relations, drug testing, team expansion and other issues. NBA revenues, which were $118 million for the 1982-83 season, hit $4.6 billion for the league’s 30 teams last year. The Sacramento Kings—sold for $10.5 million in 1983—changed hands in May for $534 million. Playoff games were shown on tape-delay in the early 1980s, but are now broadcast live in 215 countries around the globe.

The average NBA franchise is worth (equity plus debt) $634 million, up 25% over last year. Collectively the 30 teams are worth $19 billion versus $400 million in 1984 when there were 23 teams. Stern has served his owners well. Under his watch, every team built or completely renovated their home arena leading to total gate receipts of $1.3 billion last season. He pushed through a salary cap starting with the 1984-85 season that helped owners turn a profit and level the playing field (the cap has increased from $3.6 million to $58.7 million this season). With some help from Nike, Stern’s idea of marketing of individual star players—Jordan, Kobe, LeBron—created global celebrities and fueled interest in the game (see "Kobe, LeBron Lead NBA’s Highest-Paid Players").

No team has benefited more than the New York Knicks. The NBA’s most valuable team for a second straight year, the Knicks are now worth $1.4 billion, up 27% from a year ago. A three-year, $1 billion renovation of Madison Square Garden pushed the Knicks’ revenue to $287 million, net of revenue sharing, last season. The Knicks’ average TV rating on the MSG Network was 3.1, up 71% from the previous season, as the team made the second round of the playoffs for the first time since 2000 (both the Knicks and MSG are owned by publicly traded Madison Square Garden Company). The playoff run and arena renovation helped the Knicks generate operating income (earnings before interest, taxes, depreciation and amortization) of $96 million--a record for an NBA franchise.

Profitability was up across the board in the NBA’s first full season since the 2011 lockout was settled. Operating income doubled to an average of $23.7 million, the highest since Forbes began calculating NBA valuations in 1998. The new collective bargaining agreement reduced the players’ cut of revenues from 57% to 50%. The CBA also boosted revenue sharing from the NBA’s haves to have-nots. Only $55 million changed hands under the prior CBA, but low revenue teams were supplemented nearly $120 million last season mainly from the league’s top revenue clubs. Close to $200 million is expected to change hands this season based on last season’s financials. Former perennial money losers like the Charlotte Bobcats, Milwaukee Bucks and Memphis Grizzlies all turned a profit last season thanks to at least $10 million each in revenue sharing. Overall, only four teams lost money on an operating basis by our count.

Franchise values got a boost from cost controls in the new CBA, as well as the much-anticipated next round of TV contracts. The current pacts with
ESPN/ABC and TNT are worth an average of $930 million annually and expire after the 2015-16 season. Most big sports TV rights packages are locked up into the next decade and the NBA is sitting in the catbird seat as the last major opportunity for new sports channels, Fox Sports 1 and NBC Sports Network, to make a splash. ESPN is a slam dunk to retain rights to NBA games thanks to the sport’s importance to the network and its huge affiliate fees war chest. Speculation is swirling that the NBA might follow the NFL’s model and carve out a package for a third rightsholder to spread the wealth and boost the total value of the rights. A deal is expected in the next few months for at least double the current agreement.

One team already reaping the benefits of new TV money on the local level is the Los Angeles Lakers. The 16-time NBA champions rank second with a value of $1.35 billion, up 35% from last year. The Lakers earned $122 million from local TV last season, which marked the first year of the team’s massive 20-year, $3.6 billion deal with
Time Warner Cable. The Lakers’ Time Warner payout last season was more than 20 times what teams like the Bucks and Bobcats generate (see "The NBA's Richest Local Television Deals").

The cable money pushed the Lakers’ revenue to a record $295 million, net of revenue sharing. The team’s revenue sharing bill is roughly twice the size of the tab for the Knicks, who get a break due to their $1 billion investment in Madison Square Garden. Even with revenue sharing and a $29.3 million luxury tax bill that accompanied the NBA’s highest payroll, the Lakers turned an operating profit of $66 million, second highest in the NBA by our count.

Jerry Buss, who bought the Lakers in 1979 for $20 million, was the NBA’s longest-tenured owner before his death in February 2013. Lakers’ ownership remains in a Buss family trust with AEG boss Phil Anschutz, who built the
Staples Center, holding a minority stake after investing in the team in 1998.

The Bulls are the NBA’s third billion-dollar franchise. The team’s $1 billion valuation is up 25% from a year ago. United Center JV, the joint venture between the owners of Chicago's Bulls and Blackhawks, signed a new arena naming rights agreement with United Airlines in December. The agreement, which begins next season, is estimated to be worth $5 million a year, and enables United to continue to be the official airline of the United Center, the Bulls and the Blackhawks. The Bulls are one of the NBA's most profitable teams every year thanks to four straight years of league-leading attendance, as well as payroll restraint. Although last season, the Bulls bumped up their payroll and incurred a $3.9 million luxury tax bill. Profits were still fourth highest in the league at $52 million.

One-third of the NBA’s 30 teams have changed hands since 2010. One of the attractions to the NBA for new owners is the global nature and potential of the sport, which are much greater than with baseball and American football. More than half of the 42 million daily page views on NBA.com originate from outside of North America. A record 92 international players—France leads with nine—from 39 countries and territories were on this season’s opening night rosters. The San Antonio Spurs have a record 10 international players.

The NBA launched NBA China in 2008 with a $253 million investment from ESPN/
Walt Disney Co. and several Chinese partners. The NBA owns a majority stake that is divided evenly among its 30 teams. Bankers estimate the venture is worth $1.5 billion to $1.7 billion. NBA revenues in China are expected to approach $200 million this year with significant growth potential thanks to the estimated 300 million people, or roughly the population of the U.S., that play basketball in China, according to the Chinese Basketball Association.

India, and its 1.2 billion people, also provide a rapidly growing audience for the NBA, which opened an office in Mumbai in 2011. Vivek Ranadive became the first Indian-born majority team owner in the NBA in May when a group he led bought 65% of the Sacramento Kings for a grossed-up price of $534 million (see "Can A Team Save A City"). Ranadive wants to bring the Kings to India for an exhibition game next season and his goal is to make basketball the No. 2 sport in India, behind cricket.

The NBA’s global audience is evident in its social media following. NBA squads have the top four Facebook followings among U.S. sports teams led by the Lakers with 18 million fans. The only comparable teams on social media to the NBA’s elite franchises are European soccer clubs with global followings like Chelsea, Arsenal and AC Milan. The NBA’s league Facebook page has twice as many fans as the NFL’s and almost four times that of MLB.

I am a senior editor at Forbes and focus mainly on the business of sports and our annual franchise valuations. I also spend a lot of my time digging into what athletes earn on and off the field of play. I've profiled a bunch of athletes that go by one name: LeBron, Shaq, Dan...